UPSC Prelims 2004 Q23: Indian Economy – External Sector & Balance Of Payments
- (a) Chemicals other than fertilizers
- (b) Services sector
- (c) Food processing
- (d) Telecommunication
Answer: (b) Services sector
Explanation
> Note for students: Some answer keys give (d) Telecommunication, but cumulative FDI data put the services sector above telecommunications among these options, so the answer by facts is (b) Services sector. If you are unsure, skip it to avoid a negative mark.
Sector attracting the highest FDI inflows over a decade
| Sector | Position in cumulative FDI inflows (1991 to 2004) |
|---|---|
| Services sector (financial and non-financial) | Highest of the four options |
| Telecommunication | Large, but below the services sector |
| Chemicals other than fertilisers | Lower |
| Food processing | Lower |
Among the four options, the services sector (financial and non-financial services) attracted the highest cumulative FDI; telecommunications ranked below it. Electrical equipment, including software and electronics, led overall but is not an option. (The circulated key says Telecommunication, which the sector data do not support.)
Answer: (b) Services sector.
Why each option is right or wrong
- (a) Incorrect. Chemicals attracted far lower inflows.
- (b) CORRECT. The services sector led among these options.
- (c) Incorrect. Food processing attracted far lower inflows.
- (d) Incorrect. Telecommunication ranked below the services sector.
Key point
Cumulative FDI 1991-2004: electrical equipment first, then services, then telecommunications.
Remember
Services sector led FDI inflows among these options over the decade.
Common mistakes
- Choosing Telecommunication because of the telecom boom.
- Ignoring the sector-wise tables of the DIPP and the Economic Survey.
- Confusing a single year's inflows with the cumulative decade.
Exam tip
Check the cumulative sector-wise FDI table: services ahead of telecom.
Sources
- Department of Industrial Policy and Promotion, Ministry of Commerce and Industry — Fact Sheet on Foreign Direct Investment (FDI) from August 1991
- Ministry of Finance, Government of India — Economic Survey 2004–05 (foreign direct investment)